Atlantic Capital Bancshares (ACBI) 25 Oct 192019 Q3 Earnings call transcript

Good morning. And welcome to the Atlantic Capital Bank Third Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions]

is event today’s note being recorded. Please now Ashley Carson, would Officer. like and to to over conference the Executive Affairs turn Community I Vice Corporate President, go Please ahead.

our all Thank today me Officer. and our Williams, joining thank Patrick Rocco. Doug discuss XXXX you are Executive you, us call. And to for Chief third results With Oakes, quarter earnings Financial for Officer; Chief

you I Investor Atlantic we caution As release the of earnings making the be statements that in Capital this Relations a wish our forward-looking website. reminder, available is section call to will during that encourage statements the to results the This and earnings actual to and equally may applies made differ in information. We disclaimer forward-looking disclaimer you materially. this release call. with dealing review

references those Information include measures, financial In filings to our GAAP release. discussions to measures, be reconciliation in addition, about found in and may SEC may measures. including earnings non-GAAP our some

call Capital, the I’ll that, to CEO over with Atlantic of turn And Williams. the Doug

solid growth recorded another and strong expense credit Capital good Atlantic Thank client and results. quality. operating management and and disciplined from loan morning. quarter you, relationships, expanded new sound Ashley, With deposit of

of quarter per income share you’ve or per share quarter third we $X million or operations for and million million XXXX. $X.XX quarter $X.XX to compared for As $X.XX of diluted share seen, the $X.X continuing from for the $X net reported the third or XXXX, diluted diluted per of second XXXX

quarter loans investment linked-quarter XXXX. XX% and XXXX. and for industrial increased from grew Commercial annualized and of estate the XX% over commercial from annualized held Loan quarter quarter operations XX% real third grew owner-occupied the third of XX% from continuing the second and

quarter annual categories compared continuing our second quarters this rate quarter XX% XX quarter of a to deposits loans and the third XX% Average average at XXXX. third which over were operations from last of of as in annualized a company history the compound up the grown the XX%. For is public has core

of deposits demand XX% Average were the quarters. quarter average during of compared XX% grown compound quarter XX% demand XXXX. third last a at Non-interest-bearing XX% increased annualized deposits to second XX rate the over quarter for deposits of the average have and and non-interest-bearing third the from annual total

This management from client quarters of purpose client last of is new growth with loan tailored common and over the solutions the prosperity deposit service reliable the expanded direct aligned relationships and delivery. and and and fault the treasury for XX credit full company product fueling

at are a the company attractive to last an bank culture priority pleased and and Capital is best key report distinctive Building that to we a banker a as quarter Atlanta is for. our American competitive by weapon work recognized was

driven key results. to elements of client focus are teamwork and culture, this Two expertise our management foundational purpose risk and performance

and credit officers, solutions experienced delivery deliver operational and to Our management bankers, professionals talented officers service and work to treasury support well together clients. and and design our

expense down modest in pace in making Good work at in team treasury market in management was non-interest the processing transaction our company the investing in is from and opportunities specialized grew Atlanta quarter productive the and and XXXX capacity while new to efficient, that second and year-over-year. businesses, third of quarter a more actually pursue our

investment our basis were Non-performing points Sound at XX results sustainable year-to-date. loans points assets XX risk Capital charge-offs points were of basis at assets end. of quarter growth Atlanta and for management practices and XX for it. enable the basis show quarter Net held

return and Now, fourth perspective then our will in priorities quarter. you the to I’ll more Pat? Oakes detail review with and the the Patrick outlook offer on financials for

XX% of net $X.XX Atlanta the closing Capital after results first the sale included April. am from and share per for our another diluted to of I emphasis on on an from XX, of compared strong expense also happy $XX.XX Thanks, in XX% of quarter book the per XXXX, brand quarter management. an deposit XX% third continuing ratio full share, an increase growth, This value and Doug, and good increase Tangible September loan deposit and to our XXXX. of the of of morning, operations solid and everyone. report loan quarter income

in pleased quarter. despite a our NIM with expectations. recent was We in fed are was in This X.XX%, third net X.XX% line the these in decline rate. X-basis-point from our from in the margin The the the cuts quarter the the results, margin second interest with decline funds

the in drivers volatility mainly our cash of in in deposits, by main short-term an deposits rates, deposit decrease cost offset decline a This and earlier. a reduction increase LIBOR The quarterly interest this in interest-bearing balances. loan growth of Doug our non-interest-bearing solid to as one-month and in due excess higher yields lower were is from mentioned

loan our uncertainty on guidance rate With tied book of loans and the rate XX% of is LIBOR. will put our approximately sensitive with This providing future to NIM pressure our margins. continue bank further remains cuts floating one-month of The to XX% asset difficult. in

basis quarter X.XX%. decreased points For XX third yields the loan to

sheets, deposits. third in negotiated were rates, basis with XX% about which our X.XX%. points index some interest-bearing rates reducing included to lower account quarter our along in we X interestXbearing This the our market successful the benefit in for deposits During of decrease the and of deposit from cost rate

cost bankers much can to rates. reduce Our we reduce these competition quickly is with as their lag but with how deposit working customers negotiated will there continue a as allow,

to of cost points decreased X.XX%. basis overall Our X deposits

million in by quarter continued and the XX% growth strong from linked-quarter of compared quarter, third payments the grew Service annualized $X.X fintech XXXX. Non-interest in driven our XXXX, third income totaled in income charge $X.X prior XX% third million quarter the $X.X to of million in and businesses. in the quarter

extended reduce replacing portfolio gain securities. sensitivity with the of duration to sheet The short quarter order included of selling the duration securities began and the we balance asset a also investment the municipal of on sale securities in the as to $XXX,XXX by

portfolio additional municipal to our have our to income We additional will the NIM. quarter. fourth and some This maturing will result improve but our held sensitivity continued pressure purchase reduce in during securities on in

the sale. managing premium third Based invoices quarter on from XXX,XXX FDIC lowered post remaining that be not focus Total to on by the continued the anticipate the million. assessment future the for branch second credit do our with XX.X We an expenses our quarter from to FDIC third we in pleased quarter. expense few FDIC that am next the having can an applied decreased XXX,XXX credit expenses quarters. expense in benefited I

under to continue shares our We $XX purchase share program. actively repurchase million

the $XX.XX. $XX share million X.X million During or program $XX.X approximately the -- average This at to shares X.X $XX.X total and repurchases count by has million brings million reduced we shares an or purchased price quarter, of XX%. our

decreased improving equity return common from equity Given of repurchase and all management both end XX.X% this on earnings XXth. We June capital down to our quarter at activity, per our on XX.X% share. share and remain from tangible ratio focused

back I’ll turn to Now, Doug. it over

number transaction four In or deposit focus maintain Number treasury capacity this best-in-class quality. calls five reformational return earlier Northwest Atlanta strategies. And growth The priorities our employ rather divestiture and year management for management and you. one, we’ve building two Tennessee, the following the transformational with specialty capital based our Georgia Number of shareholder enhancing processing by on relationships. number three credit businesses. complete growth investing Number shared business.

energy compelling agree I we’ve our these priorities addressed company. reflect that in our and results and of building with each of progress the discipline, that think you’ll value

We progress expect the fourth quarter. more in

opportunities Our are and remain bankers pipelines pursuing new business solid. energetically new

well Good improving risk teamwork Credit is is efficiency. managed. our productivity and

apparent in become of more effect will these rate sustain to expect the trends. reductions interest the operating While we quarter, fourth good

well is XXXX Our planning for underway.

of course the of businesses. rates is turmoil opportunities we Capital for see market in our and uncertain the Atlantic midst the and Although, considerable interest economy specialty in Atlanta

team, capital energetic flexibility engaged We’re capacity address and new an to opportunities. robust development well-positioned business with these and

Now, answer questions. we’ll be to happy your

Please you. Gailey comes [Operator ahead. first Brady Instructions] KBW. question from go Thank Today’s of

Hey. Good guys. morning

Good morning Brady.

the to I the wanted mean, you amount material back Doug, bought I a of over stock buyback, with year. your last start

this going in that quarter. So excess the done the million have you’re the capital. have space $XX like at it to still fourth you’ll When happens feels

buybacks about in you think do how So XXXX? additional

start. I’ll

think initial complete million here program. $XX is the goal I to buyback

the in still planning Board. processes capital We’re process with planning --

this in to any take. about think get And so finished I we once more steps want January we to additional come program

say various just forward. going we’re I strategies Yeah. that evaluating

have that we position those We Board for information the the have really capital sharing will we’ll you and more finishing year. in with the out January. like We

a of have We mentioned, both that purposes. capital conserve lot flexibility, and offensive as defensive I and

Yeah.

the mentioned And in then, munis. the portfolio Okay. some buying and you Pat, bond making changes

going these of more you shift you Do million. that quarter fairly higher look just balance balances in to a lot and is forward? was stable mix about at changes third those go the the stay should or the bond average If $XXX expect it a with book

of were is the did that we the doing Well, sales of we part reason it’s down the restructuring. as because

we from the back see that you’ll So what balance increase up was most build in second and quarter. likely

on And and Okay. XX up impact anything the coming here likely in days. CECL

of in our being stages on we So short commercial material be business we’re the so still to expect and what finalizing is portfolio. a our that. allowance point, focused change don’t At final a based this duration going in models

I program That in that of to last gotten just do mortgage start participate down robust But for lot more mean, business the warehouse in lot that space mortgage business. robust X% a been of to expect with the your warehouse given And another right. has know are backdrop nowadays? more recently All loans. a partner being business, me, more to then just rates. bank you I with it’s you

those next quarters. I of balances the did Brady, diminish We couple continue anticipate not, -- to would over we will

for Thanks Great. the Okay. color guys.

Thank you.

Stephen question next today ahead. our And go O’Neill. of Scouten Please comes Sandler from

morning. Hi Good guys.

Stephen. Morning, Good

Good morning.

of Maybe maybe maybe how the origination last the color growth overall you’re little pipelines activity, how really around demand last that in in to there are what if your to few down demands seen question kind looking. some we’ve loan just -- seeing regards follow from you Brady’s on -- pay loan compares And and of bit loan could customers quarters. what expectations, to on a kind up give quarter-over-quarter

generally this think trajectories solid respect the and year -- loan mentioned, in prior to been Yeah. We we I as years growth sustain we’ve pipelines that on categories. and the with remain we various can

Having fourth said evident not calibrate and softened anecdotally, only also the this data quarter, but to, to very bit the that, difficult for less a it’s that is in XXXX. demand excuse me, year and up

to that guided think single-digit like year growth and for still loan I a reasonable looks expectation. you we the high

out, the range, X% finish to in I would guess. probably, So, X% the year

falling too, you’d or to you the guess, stages. how do longer moving back like in to But capital Okay. ratio That’s I But whatever a and or do term, be of base capital risk maybe look And you still bit little level about said appropriate where on you think you’re an how that planning helpful. capital I what think you about would centrally. total that’s operate? whether long-term TCE know most

So have the risk lot is a bank us us at biggest based model. business constraint capital total for the and of

that have kind bit associated lot of with far We of a unfunded more a capital commitments that. little

our biggest constraint. that’s So

almost -- and there We’d But we like over from obviously, we’re is to you’re well like, that. a get said, ratio now. well offensively But are that, the XX% right, TCE aware good capitalized defensively. down, around at and Doug -- that’s constraint

feel Okay. segments, is MSA last give Great. hiring the really that’s in investments just of pace marketplace, where for of goals, what about be? certain incremental a thing submarkets can then focused of today you’re you will just on kind in me direction certain investing new us today, Atlanta the the you’re maybe kind Atlanta talk of for there And whether

be quarter credit told new seven people we’ve our delivery this in officers new and including service call, you folks. As will I operational producers, XX the over we’ve XX hired remainder think, second year,

The of slowed. pace is hiring

become absorb we We’re and as quarters here see anticipating into particularly next XXXX. the few move more it productive to that growth

remain good to hired people become But hire we’ve see will a think will absorb at with people that work them. them to folks little find be hiring opportunistic more want respect We it quick the time to I productive. very Atlanta we Capital to and take when will

and as That in And Atlanta we our strong for seen next few of outpaced businesses And have very been quarters. businesses. and hiring had here has across growth deposit but growth. you’ve specialty we’ve growth into deposit the loan the year growth. expectations in only this sort has both well loan fact continue of may that’s scope been in The not oour the

Super. appreciate for guys. the Thanks I it. color

Demba Jennifer ahead. with next And our from question comes go today Please SunTrust.

Thank morning. you. Good

Good morning.

criticize Question for of underneath wondering very loans on what I’m just any you. credit, kind thing? in that kind any trend good and it’s you’re the what you still of certain covers sectors, cracks seeing

solid. remain stats credit Our

or are very unusual any seeing broad based migration trends not problems, We’re the say, I would stable.

particularly are and of respect with C&I the as behavior world certainly point the at to told in we life business We’re you this cautious CRE the we mindful management in cycle. cycle

low. no we levels. However, move expected time. should -- We’ve our some fourth quarter, change meaningful refinancing remain seen over payoffs from fact, in away charge-offs payoffs see the down loan in with totals classified classified us And in

So feel credit of at credit unexpected is about remain always quality to think There the stable we good the we point. but possibility this and is occurring, so. likely

Thanks so much.

Yeah.

And question today ahead. Comery Steve Research. go our next from G. of comes Please

Good guys. Hey, morning.

Good morning. morning. Good

morning. Good

with to expect whether policy? kind on some seeing you or look fed not mix the what market of how are want or the in color Just ask you just kind to going general pricing, forward and about positive just of the you expect your guys

you referring what Now, to? are when say you mix,

Yeah.

there reduction at comments of just at that IN kind how look the mean, you was substantial point? in broker deposits, funding source pretty on maybe quarter I So, a some this

sold been deposits pay branch sale higher Well, with broker we and and you -- core in what anticipation here obviously, of of allows We off amount that deposits. been pretty these of some because had that. cost funding. can we’ve focus And increased off do the that, as has growing significant the is a wholesale deposits on growing successful obviously, with to us see, deposits,

continue we goal off, of helps to margin, helps with growth do better great, which funding, that’s that. so pay Now all the is to we’ve forward it the some it going seen, that

see DDA at can XX% our that XX%, with deposits. you of As

guys anything Okay. then you just mean, about seeing of, deposit changes thinking competition? kind fed generally, you And or anything are following Are like I different that? recently

Yeah.

commercial are bank. we look, So,

have lot relationship is of we So a based. what

we’re relationship yes, competing overall So, with with the other banks.

necessarily just the that not competing see it’s we for somewhere. special It’s individually. advertised So a business more

relationship, negotiation with lot with overall So going in it’s on individual a the what’s of along market. and customers

So it’s lot of one-offs.

Okay. Fair enough. Thanks.

NAB question ahead. Research. Nancy from comes of Bush next And today the Please go

gentlemen. Good morning,

we’re Just and -- a you Doug which that to Pat. seeing in markets vary the The day-to-day. the seeing question from that general for we’re issues days, issues these seem liquidity

you growing hit concern Given or did cetera, business, at they these at et all you your did issues all? payments

of we’ve and They said, balance year. strong access of haven’t liquidity have a as at this point really sources. we to this deposit lot liquidity had maintain from We sheet Nancy, a growth the on lot various

volatility well and do I been able So point up expect to I we’ll to very we’ve continue to this manage build day-to-day think think that to to that.

No.

-- One end of the things is liquidity… we’ve discussed is potentially year approaching with with

Right.

end, year at since … more holding cash. its

potentially So as end. the the you cash our balance increase could at year see going protection in bank just

a now they would you -- margin? So material itself the -- impact anticipate would don’t but they have that on

Not material.

Okay.

call of negotiated issue rates, whole this it. guess, rates negotiating you’d and Secondly, negotiated I

like okay, we’re is negotiate in those to you you to in partly work? you now. to You’re to how how who one -- wondering only that if does on the going just but we we fees have whatever, that offer offer or I color mean, say, I need right do something rates, mean, give discussions process I’m some go. can the

right? Look rate a overall were pay we And higher is there -- got the this them as negotiating an already customers anything rates. You’re typically deposit these rate, besides lot we increased of because rest not with fair of look to relationship. relationship,

Right.

expecting get And move was thing that. quickly. our that same very big we’re down. is And get this idea of think very, But change, bankers most I look moved customers the rates as most a rates and

comfortable… So it’s getting everybody

Right.

shift. that with …

deposit both So be to need on fair customer just also sides. lose rate, lag. we don’t want but cutting to a a We by

a in So progress. work just it’s

excess respect a that national. with competition sort market for to it’s I And say, corporate national cash, is would

have very banks so but are direction. So you just and these customers rates, in those is nod have from generally, move forth. we to match rates don’t for direction. money see necessarily what And market that online that in money high or relationship We to looking market funds our a

Right.

as is going of than there in more but there on But understand they’re so had we find period And lowering to down says, move rates of -- lag just a willing time. a quarter year, this Pat lower success over -- we far we they we expect as to and really then what’s have rates. of forward we move and terms

the market And ancillary deposit that, to crazy in to Yeah. do just time. over has Atlanta tended things

Right.

And situation wondering right am now? the I deposit the situation how up rationality competitive pricing is sort shaping of in

a lot from is Yeah. at anywhere Atlanta the in point I this don’t country. that different else know

rates and competitive in going But is think be, we earlier again going I up as like offered fast it progress and the was being as slower they up. the would is last run not off now we than down year the year, it to that rates coming are this market. saw it

Right.

Okay. Thank All you right. very much.

you. Thank

Scott. question next Christopher comes of today Marinac our And Please from Montgomery Janney ahead. go

mentioned morning. you there. success Good on Doug, businesses Thanks. deposits fintech and

Right.

elaborate what’s can you further sort sort further that be Could propellant happening how XXXX? a there for and on of

we -- think exciting opportunity. an it’s really It’s Yeah.

I in is We have very Atlanta. positioned think ourselves ally payments nicely that the

We’re working with of here, the companies as country. as across number well a

have into that higher ACH We demand solid three really forward. income deposits, result going next quarters payments of pipelines volume, terms and and out new in charge volume, service higher in should the two,

very we’re that. optimistic So about

carved a we’ve niche think competitive We out in highly business. that

over management treasury show We should are And it the in of few and here. next strength for is this and company very results area a item services confident in quarters up processing. our real the

as just result this? that it is sort slightly possible ratio of And all the DDA Great. Okay. of a rising

But so. it Well, we don’t will. hope if know I

several excess in those of balances. good important We margin it’s at gather now will up XX% been be to an there for work. some more mitigating forces of countervailing Obviously, non-interest-bearing We’ve compression that in deposit. had last element sore and the have quarters held got growth pleased

core business is So strategies that’s of part particularly of transaction our treasure that management we this to a and have. processing

follow for about you get or that. rates. least to to Okay. Great. in the for a do seeing sides? prepayments loans are Nancy’s then favorable on penalties something question negotiated floors both you to at waived Thank terms are for you even negotiate or ability and of that up reasonable And What customers of

Yeah.

are fixed customers we opportunities There lower among at elsewhere creating I think so see and some to to the various that are of market. just to that. some do it refinance and in here rates interest that’s starting

in We going also to trying some loans get forward. of we’re some LIBOR our -- floors

a we’ll I in that successful that’s but the starting something think doing aspect we new that’s are if market. to forward, And see that -- we’re going do.

Thank Great. you, Doug.

our And question next ahead. James. Raymond go Wallace William of comes from Please

guys. brief. have up a been follow any be morning, to you questions loans Good today? floors question Thanks. I’ll on Do Most but have in up are Chris’s as asked, that sitting quick floors.

We -- I diminimis. we [ph]. we don’t do do, think Walley If its

in competitively seen market haven’t three sort so of We the I now. for, know floors years don’t or

and I that’s of do like competitively seen those to be And remains start to so and in that. why say to we’re whether some effort our work that we’d early will getting

we rate. Walley, more fixed success doing have think, I

Yeah.

than floors. doing Rather

have that fixed We probably rate. business is XX% of new our percentage loan doing higher portfolios our a fixed, of

Yeah.

So it’s needle more having move probably but luck. we’re that’s the significantly, where hard to

where C&I cycle is because you’re that that are Is given in you’re the doing loans focus? or the shifting because less we

in Shift the focus.

is been has interest the in financing more demand. than to the borrower now fixed shifting There doing in We’re in there response focus past.

we have interest in that. more obviously, And

Pat And seeing that. says, incrementally, in we’re interest growth as a there. more our portion have of good we And

more C&I. are doing We

different per pace defined, code, we We estate, as C&I this we annum which owner growing a commercial for XX now are business broadly been is call but quarters very XX% doing C&I real the in compounded. occupied at nice as mentioned, regulatory a more

-- robust mix. that of about So we a of our the XX% sector have business, growth now have we which is in total

what then and just -- the then was margin do NIM, the September? month Pat, questions And on Okay. two have you interest of for the

don’t disclose it. we But Yes.

Lower.

lower. was It

I way further best any don’t look, the is, I cuts. that get will -- guess, what to So, rate we answer

-- points We’re more cuts, another probably rate here X alone see basis with just or some margin points any pressure X probably, that. basis going another to without further

Yeah.

you will obviously And in of top in rate on any add December October, so. then cuts we head that

And basis does that that’s not in or October X that’s X seen does we’ve to points, LIBOR be -- points that basis that already would that additional what -- from include -- pressure? does

from pressure lower cut so rate We see in we see September. but would some the late impact of the That September. didn’t a didn’t LIBOR. be lot from the it. Obviously, all additional was We of not in saw of because LIBOR

Yes.

We’ll of that October. in see more

Yeah.

then, deposit And that. benefits with to more the cost and but cuts, obviously, get come

before, there’s going said I’ve to with lag as be margins, So our initial really…

Yeah.

soon to around and start cuts. as side, … the deposit catch up get these through we rate we can as hopefully,

Right. and prepared write you enough, the fast Understood. And amount LIBOR it tied dollar to the Pat, couldn’t to what’s but said tied dollar I amount prime? the know in remarks, I

amount dollar it’s up devastating LIBOR tied So -- for million. rather you, it Hold on, $XXX is to over that. just I’ll pull

rough. It’s

it to you. back get I’ll

XX%. roughly It’s

Yeah. $XXX million.

Yeah.

-- million on XXX XXX then another prime? And and another is

the $XXX prime million. And about is

Okay.

appreciate the guys. Thanks Great. really I time. Okay.

Suddenly.

And to ladies like the back concludes I for remarks. management the and session. the team over this conference final any would question-and-answer to turn gentlemen,

that results first week wants very All morning. anybody right. in next today Very we’re to. dialing have for you much. pleased our with part you further Thank discussion and We of to and available appreciate this

Thank all presentation. included. attending Today’s you, sir. for thank conference you has today’s We now

disconnect. You may now